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Why does Tesla have so many options?

Personally, I don't even get why Tesla even has as many options as it does. I think they should jack the price of all their vehicles by $10K and throw in all the options they now offer (Tech package, Sound Studio Package, Pano roof, Active Air suspension, Paint Armor).

In my books, the sales process of a Tesla should be a lot like buying an iPod at the Apple Store:

1) Check it out (test drive for Tesla).
2) Pick the colour.
3) Pick the capacity.
4) Pay

Not that it would ever happen, but that's the approach I wish Tesla would take. Drop that $30K goal for Bluestar/GenIII. Make it a $40K goal (after the tax rebate) and offer uncompromised fully loaded vehicles.

They'll make their sales goal whatever happens. They don't need a $30K econobox to do that. I don't think they need to be firm on $30K. High $30s after the tax rebate would still sell like hot cakes.

In the long run, I'm more worried about Tesla preserving its brand as other companies begin to shift to making EVs. At that point, just being a good ranging EV won't be enough. If 160 miles is enough for many a Model S owner today, than it'll be enough for many a future car buyer, purchasing from other OEMs. At that point, buyers will be comparing more than range. And it takes a lot longer to build or repair a brand. Tesla needs to move even further towards being a brand known for zero compromises. Tesla's differentiation, can and should come from the sales experience, an uncompromised product and the owner experience (full service maintenance, charging network, etc.). They can't rely on electrification for differentiation, forever.

Thanks, you would have lost Tesla a sale. I am SO happy they have options and hope they hold onto them. I could buy the car for 10K more with the 60kWh battery I need but I don't want to waist the money on the options. I have never had them on a car before and do not need/want them.

Sundre: +1 My thoughts exactly.

@sudre

I question your opinion. Let's face it. You're an early adopter. You would have bought the car if it was 10K more and loaded.

The thing is hardly anybody seems to be buying the base S with no options at all. Most at least get the Tech package and Pano roof. Such customers (who only buy the base vehicle and nothing else) are marginal at best and pointless to a company with a full year's worth of production pre-sold.

The added benefit to Tesla would be fewer configurations, a more premium rep to their brand, and higher margins.

Keith, I do not want your pano roof or paint Armor. I would pay extra not to have them

keith;
Expect TM to increase its "optioning" of features. It has adopted a policy of "let the buyer decide". Many here think even the bundling it already does, e.g. the Tech Package, is too inclusive, and should be broken up.

Mel,

Tesla just raised their prices by $2400. Wouldn't you rather they have had a higher price and included more in the first place?

Brian,

The Tech Package is just bogus. Much of that should be standard. And the Model S isn't really a Premium sedan without it.

Keith, I did not want the pano or paint armor, and I am glad I didn't have to pay for those items. I really like the idea of keeping the base price as low as possible so more people can afford this wonderful machine. Not sure I answered your question, I guess I just like the way Tesla is handling options and pricing.

NO keithz you are wrong and stop trying to be ME. I almost canceled my order altogether. If they would have dropped the options I promise you, I would not have bought the car.

I have been waiting since the 1990's for an electric car... ever since I heard about the EV1. I even called GM in 1998 and tried to buy one. Living in the Midwest I was not able to lease an EV1 so I waited.

By your analogy I would have bought the Roadster because I can scrape up enough money to buy one. I did not. I was not interested in a two seater sports car. I'd been waiting 6 or so years, I figured a few more wouldn't kill me.

I am not just buying the Model S because it is a BEV altho that is a very top reason for buying it. If that were the case I would have just bought a Nissan Leaf. I am buying the Model S because almost all the reviews have said it is a game changer.

The Bluestar/GenIII is going to be the car for the masses not another car for the well off. I imagine the 30K version will be rather stripped down. My wife doesn't even like power windows and locks, "Just another thing to break". She owns a 2001 Toyota Echo with a cassette player and A/C. That is all the options it has except it is an automatic because the dealer could not find her a manual.

What you are trying to say is that only people who have money should be allowed to purchase a BEV with real range. That is just rude and snobbish of you. You don't want anyone else degrading your choice in cars. Glad you are not running the company..... into the ground.

People want choice. Don't need to say more than that.

@Sudre

I apologize if you got offended. None was intended. My concern comes from two angles: 1) As an investor 2) as a Tesla enthusiast.

First, let's set aside your personal case. I have a six figure income. I live in an urban area. I'd be a decent candidate to buy a Model S. But I know that would be seriously breaking the bank beyond any point that would be sensible. So I'm choosing to wait for the Gen III. If you ante'd up for the Gen III, that's great for you.

As an investor, I think Tesla (and virtually everybody else) grossly underestimated demand for the Model S. And they also grossly underestimated average sales price. If the supposed $75000 ASP is true, then it's quite clear that hardly anybody is buying the base vehicle with no options.

More broadly, like I said earlier, I am concerned about Tesla protecting its brand. The Model S is a pretty car. But Tesla portrays itself as a purveyor of "premium electric vehicles". What premium brands routinely sell without keyless entry, leather seats, or high-intensity lights? Heck, Lexus now has a moonroof as standard on even the $35 000 IS. I am concerned that Tesla's self-image of "premium" isn't lining up with reality. And once they get past the enthusiast set, regular buyers will be much more discerning. And much of Tesla considers options will be viewed as nickel and diming.

Putting those two points together, it's clear to me that Tesla would have been better off with a higher price and more standard equipment. Their cars would have been more in line with their "premium" self-portrayal. Margins would have been higher. And Tesla would have had far fewer configurations to deal with. And their waiting list wouldn't be ridiculously stretching into 2014. I wonder how many customers that fact alone is turning off.

And once Gen III comes out, they won't even need the S40 anymore. Let's face it. That car is a compromise (by Tesla standards). And it's there so Tesla can claim to have a price point below $50k. Once the Gen III appears with half the lineup below $50K, there won't be a need to maintain that charade anymore.

"hardly anybody is buying the base vehicle with no options"

Correct. But then you jump to conclusion that people want same options. They don't. Like the roof you give as example. Some of us don't want that panoramic glass roof. Or 21 inch performance tires. Or air suspension. Or...

IMO more options is better than less options. And IMO Tesla option list is actually too short, not too long. I seriously hope GenIII affordable car will have more options than Model S has.

@Timo

Okay. I was being a tad extreme. In my books, the Tech Package though should have been included in the base.

Were certain items mandatory (like the Pano roof), you could always charge to take it off. I wonder what Lexus does if you show up and say you don't want the standard included moonroof.

I would love some discussion on the rest of the points I was making, about fewer configurations, higher margins, and protection of their brand. That's the core about my argument. Not which options should have been included as standard equipment.

Your conclusion still doesn't hold water. Just raise the base price and keep the options (which Tesla did). . . . if all you want is better returns on your stock when Tesla starts paying dividends. I think a 20-25% profit is plenty.

You are mistaking the order of car creation with Tesla wanting to only sell cars to the top income bracket. Elon wants everyone driving electric cars not just people with high incomes or the ability to save and invest for something. That is why he created a base priced car under 50k. I also think that was part of the loan Tesla received.

I do not see the logic that options makes a car less appealing. Options just give people choices to fit their preferences. Tesla made a luxury car for 80-100k+ then took stuff off to make it not a lixury car for those with tighter budgets. I believe all the test drive cars are the luxury version. Have you test driven one yet? If everything you see is the top of the line and Tesla says the car as driven costs $89,000 doesn't that pretty much fit your idea. When the customers eyes pop out pf their head at the price Telsa product specialist can info them that the price can come down buy removing luxury features from the car.

As far as someone else seeing the inside of my lowly piece of crap $72,000 car. . . only I and my friends (who can only afford used cars) will ever know. That is true for most people purchasing the losser version. When my car hits the used car market the rich Luxury car buyers will never know because they will be buying their brand new Model X or Model R.

There's another point. People seem to insist on analysing TM as though is was a standard company, whose end and ultimate goal is market penetration and domination. False.

It's REALLY hard to get your head around Elon's real goals. You should try taking him at his word, instead of blowing it off. He wants to change the world by using electric transport. Really. TM is just a means to that end. As he said, if you want to become a billionaire, starting a new auto company should not by near the top end of your list of strategies.

Further, the Model S is TRIVIAL except as a means to leverage the GenIII. And, who knows, maybe a GenIV at half the price again (with features and tech and quality that puts current EV offerings in that range in the Dinky Toy category).

typo: "not be near"

I get Elon's mission. But I also him as Steve Jobs 2.0. Jobs didn't try to get an iPhone in every palm by selling a cheaper iPhone. Do any of you remember the debates pre-iPad over whether Apple would make a netbook?

In the same line of thought, it's quite clear to me that when Elon says he wants to see everyone driving electric cars, that does not mean he necessarily wants to sell you a stripped down Model S. In all likelihood, he'd rather you have a fully spec'd Bluestar in 3 years. You get a much more premium product, and his company gets better margins.

More broadly, if as you guys say that Elon doesn't give a fig about profits, then perhaps the short sellers are right with their doom and gloom forecasts. Thankfully, I don't believe that as driven as Elon is, that he isn't committed to running a sustainable and profitable business. If I had any reason to believe otherwise, I'd short the stock.

Keith, the Model S is attracting a lot of people that never would have purchased a 'luxury' vehicle. They are really stretching already. Your suggestion would cut many of them right out of the market.
As an investor you need to keep in mind that shrinking your market lowers your sales. As of right now that isn't an issue, but after your get the initial swell of early adopters and enthusiasts, you need market share.

I have a friend who took delivery Sunday of a beautiful 85kW S, without the tech package. He doesn't miss it a bit. I myself am considering buying a second one to replace our Volt. If we do it will definitely not have the Pano roof, nor 21 inch tires and probably not the air suspension.

Giving the customer options is a good thing in business. As an investor myself I would have serious concerns if the hiked the price and standardized the options.

@Mark22

I would think anybody who is stretching themselves is a marginal customer at best. Why does a company with a year long waiting list need marginal customers?

These customers could just as easily be won over with the Bluestar in a few years. And they'll probably buy fully loaded vehicles, yielding even higher margins.

I don't get the whole fairness schtick. As a "premium" car maker, they most certainly have no obligation to make their product affordable. That's what the Nissan Leaf is there for. And they should be maximizing profits, if only because it'll get them the capital they sorely need to scale up even faster.

What I'm proposing actually is hardly all that extreme when viewed in context of their supposed ASP. If that ASP is really $75 000 (or thereabouts), my most extreme proposal would have been $5k more. And I'm suggesting that Tesla give customers more value. For example, I'd like to see twin chargers as standard, and no charges for access to the Supercharger network. To me, that would improve both the brand and the customer experience. They can hardly talk about free charging when the S40 can't use the network at all, and the S60 requires a $2000 commitment.

I don't get the whole fairness schtick. As a "premium" car maker, they most certainly have no obligation to make their product affordable. That's what the Nissan Leaf is there for.

No "obligation" but Nissan Leaf is exactly the reason why they do it. They hit hard to competition before opponent can react. The Great Old ones are slow to move, but when they do tiny company like Tesla doesn't have a chance unless it has already established some sort of reputation and customer base. They can survive only by making their car affordable enough that people can buy Model S instead of Leaf. Roadster market was short lived, Model S could have been same without lower cost versions of it.

When GenIII affordable car comes around that's what will make money to the company, and only way to make it is to make it affordable enough that Joe Average can buy it (not cheap, just affordable).

Options make the car what the buyer wants... Have it your way, like Burger King... hehe. Burger King is very profitable, way more profitable than Jaguar or Audi...

Cutting options does not save much in production costs but loses lots of customers. It makes no business sense.

I love sports cars but am happy Tesla is making an SUV, I will not buy a Model X but am happy the company is offering them and making other people with other needs happy, profitably.

I would not buy a new premium sedan even though I can afford one, why - because they depreciate and are a poor investment. A Tesla is the ONLY car I would buy new, it saves me money and has what I want and can skip the bells and whisles I do not want to pay for or even like... I do not want the tech package, or 21 inch psuedo ghetto wheels, I do like and want SC and pano roof. I would appreciate even more options, I do not need keyless entry or even power locks, but like the backing camera. Why can't I get a tape and CD player - not everybody is silicon valley techie you know? Some people like and want to pay for stuff I do not want, let them have it, as long as I do not have to pay for it in my base price...

Lower price does not always mean cheap, if Tesla delivers quality for the money it is better than Mercedes - and yeah that is the ICE sedan I will ditch for Tesla.

Should those of us for whom the model S costs over 6 months of our income be waiting until 2015 for the bluestar?

Am I unwise to be buying this 80k car?

I think that $80K Model S will make you very happy and if you keep it long enough it will pay for itself... You will pat yourself on the back if petrol rises above $6 a gallon which it may well do. Better than building a fallout shelter in your backyard... hehe

The cost/annum of a MS will never be as low as a GenIII. So if that's what you mean by "wise" ...

On your deathbed, you'll whimper, "I wish I'd bought a Model S!" ;)

kkiri7: "Should those of us for whom the model S costs over 6 months of our income be waiting until 2015 for the bluestar?"

If the base Model S costs 6 months of income for you, then you are a marginal customer. You aren't likely to add options (which costs Tesla profits). As an investor, I'd prefer that Tesla sell you a fully loaded Bluestar in 3 years and make a much higher margin on that sale.

Keep in mind that there is an opportunity cost to the marginal customer. Namely that marginal customers are bulking up the reservation list. With a year long wait, it's quite likely that Tesla is losing out customers who could afford better spec'd cars, yielding higher margins.

How has Tesla responded to the surprisingly strong demand? By boosting prices. I don't see this as good for Tesla's customers or good for Tesla's brand in the long run. I'd like to see them offer a bit more and price the car higher to begin with.

When there were concerns about demand, it made sense to offer cheaper options. Now that demand has proven to be unanticipatedly strong, why should Tesla not make hay while the sun shines?

My concern is simple. In the long run, those ICE OEMs will respond. When they do, they'll have a stronger brand and better networks to push their products. Tesla can't afford to establish itself as a less than premium brand. And charging for high-intensity lights and keyless entry (or even sunroofs in some cases) is not something premium brands do.

Thanks, FLsports, Brian and Keith.
I've thought about all those points.
I was originally in the market for my favorite car, the older,more curvacious Jaguar vanden plas which they stopped making in 2009, I think. Of course those now cost less than 30k.
My local Lexus dealer who had the used Jag offered me a new Lexus LS460 for 70k with some 1 or 2 % financing deal. I have always paid cash for my cars, but was tempted by this rate.
Then I found out about the Tesla S, just by chance late last year.
Its shape was competitive vs the Jaguar and it was ELECTRIC! - how exciting. The local Tesla showroom salesgirl told me a price below that of the Lexus (which is a VERY comfortable and luxurious car).
Of course Tesla's California price was after the 7.5k plus 2.5k CA rebates. So her quoted price still does not give me the Lexus plush interior, moon roof, etc.
Of course its not an apples to apples comparison - oil baron supporter or electric car development enthusiast...
The Tesla was a joy to drive, with superb handling and acceleration. So was the jaguar, which leapt forward like the cat it is. The jag also had the English luxury inside - plush, thicker leather seats, burled walnut fascia,...
There are also the known Tesla concerns - buying too early in a new product cycle with potentially major problems, long term viability of the company itself, etc.
Ah well, I guess I still have a month or two to decide.

@kkiri7

Your thought process is exactly what I am talking about and concerned about as an investor.

Right now, Tesla has no real competition. Of course, it won't stay that way forever. If Tesla's order rates prove strong beyond 2013, then the big guys will respond. And I predict they'll respond substantially in as little as 5 years.

And when they do, Tesla will have to do a lot more than just sell a good EV with some range. They'll actually have to deliver a "premium" car by the conventional definition.

Keith;
Your 'lengthening the wait time and displacing higher margin customers concern' is entirely fallacious. A brief talk with any TM employee should disabuse you. As for the price increase, it barely tracks inflation since original reservations.

"Your 'lengthening the wait time and displacing higher margin customers concern' is entirely fallacious. A brief talk with any TM employee should disabuse you."

Okay. Would love to hear the counter-arguments.

"As for the price increase, it barely tracks inflation since original reservations."

Agreed. But in a competitive market, you don't see companies raising prices thusly. Especially not on new vehicles. Let's face it, Tesla can only do this because they have no competition. If BMW suddenly started producting EV sedans that were on par with the Model S, Tesla would probably eat lower margins and cut prices or trying and cut costs (or both) to compete.

Inflation is an excuse to take in higher margins. I don't mind that as an investor. But let's call a spade what it is.

@keithz
I agree. Also sell only black cars. Black is classy.


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